ONLINE BANKING: Metro Bank and Revolut in the Doghouse

Facebook used to say "Move Fast and Break Things". It sure did. There are many ways to win, and some are sharper elbowed than others. Is growth inevitably tied to bad behavior, or is there a version of sustainable entrepreneurship that doesn't require us to sacrifice Ethics at the altar of Monopoly? Prior marquee Fintech bad-actors include Zenefits (fastest growing insurer whose brokers were unlicensed) and Lending Club (what's a little self-dealing?), not to mention all of Wall Street and at one point or another. Now we are seeing the same sharp elbows from Revolut and Metro Bank.

Metro Bank may be a fast growing operation, but it doesn't seem to be very good at being a bank. Of its £14.5 billion loan book, the company mis-categorized 10% of its assets last month, grading that capital at 100% when it should have been at best a 50% (e.g., commercial property loans are more risky than cash). That means the balance sheet needs way more cash, and Metro Bank is out raising a cushion of £350 million -- a number that will mean chunky dilution given that the public market cap has been under pressure. There is a certain irony here as well. Consider the sins of a bigger offender -- RBS getting a £45 billion bail-out a decade ago and being forced to set aside £775 million to as penance. Of those funds, £120 million are now flowing to Metro Bank to promote banking competition. 

One of our favorites, Revolut, has also been in the news with a spat of ugly news. There are reports of over-clocked, destructive culture. Some Fintech aspirants are asked to sign up 200 funded accounts for Revolut as part of the interview process, without a job guarantee. Once they do land a job, workers are expected to drive 100 mph through weekends and holidays, leading to burnout and churn. Sounds like SoFi two years ago. Money Laundering concerns abound, with information coming out that KYC/AML control lapsed in the middle of last year. For a company that launched Bitcoin trading, this type of news is both embarassing and systematically destructive. And lastly, the main adult in the room (CFO Peter O'Higgins, former JP Morgan) has just quit as well. 

It's easy to say to look at people doing hard things and judge them on style. But sometimes the ambition isn't worth the damage. 

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Source: Guardian (Metro Bank), SharesMagazine (Metro Bank), AltFi (RBS Settlement), Wired (Revolut Culture), Finextra (Revolut CFO), Banking Tech (Revolut AML)